Implementation of microfinance policy on track

The implementation of microfinance policy, designed to improve operations and efficiency of Micro Finance Institutions (MFIs) is on track, a Senior Official has said.

The implementation of microfinance policy, designed to improve operations and efficiency of Micro Finance Institutions (MFIs) is on track, a Senior Official has said.

The Policy  was adopted by the Government following persistent  failure of MFI’s to address challenges related to insufficient refinancing mechanisms, weak capacity to employ professional and sustainable management as well as lack of regulation.

“In terms of policy, we have not encountered implementation challenges that could tarnish the efficiency of the policy, because it is simple, clear and supportive,” Faustin Zihiga Chairman of Association of Microfinance Institutions in Rwanda (AMIR) told Business Times in a telephone interview last week.

The Policy facilitates MFIs to employ professional management, increase savings and expand outreach there by contributing to poverty alleviation in rural areas, and to the overall economic development.

However, Zihiga observed that challenges remain within the sector with some MFIs failing to breakeven despite government incentive of five year tax holiday.

“Discussions are in place to extend the tax holiday period,” he said.

The Chairman also pointed out that meeting capital requirement as set by the MFI policy is still a challenge for most MFIs.

The minimum capital requirement was increased to Rwf300m from Rwf100 while business registration tax is paid at every operational stage.

Business tax registration charges also range between Rwf60, 000 in rural areas to Rwf200, 000 in big towns.
 “The policy should have the capability to continue on its own, but government intervention will always be required in different aspects like subsidies, re-financing and tracking defaulters,” he said.

However Zihiga observed that MFI’s still have the potential to integrate the poor into the country’s economic growth as their growth trend has been positive.

 “In general deposits in MFI’s grew by 20 percent - the trend is positive but not at the desired level,” Zihiga said. 
Cabinet last year   approved the establishment of special funds to support the MFIs including the Credit Fund and Capacity Building Fund.

However for any microfinance to qualify for the funds, 60percent should be financing rural sector activities. 

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